A growing number of investors are opting to invest their money in short-term financial instruments or hold onto cash, in part due to North Korea risks.

Capital invested in financial instruments ranging from cash and cash equivalents to repurchase agreements and demand deposits amounted to a record 676 trillion won ($604 billion) as of Wednesday, according to data by the Bank of Korea and the Korea Financial Investment Association.

This was an increase of about 9.4 trillion won from late last year, the data showed.

The outstanding balance in cash management accounts that invest in repos increased to 42.7 trillion won last Monday from 40.5 trillion won last year.

Investments in money market funds reached 78.7 trillion won, up from 63 trillion won in the same period.

Short-term investments started to gain momentum over long-term assets in December following a North Korean rocket test, which defense officials said was a cover for a long-range missile launch.

As tensions between the two Koreas continued to escalate with the North’s underground nuclear weapon test in February, investors faced with fewer alternative investment options put their funds in short-term financial assets.

Stocks remained unattractive for long-term investments affected by North Korea’s threats against South Korea and the U.S.

The benchmark KOSPI nosedived below the 2,000 mark, while the won to the dollar weakened to around 1,110 won this month as North Korea continued to ramp up its bellicose rhetoric.

South Korea’s sovereign risk measured by credit default swap spread increased from 68 basis points in late December to 85 bp early this month, BOK data showed.

“North Korean saber rattling is nothing new, of course, but in recent weeks it has reached proportions that worry experienced political observers,” Moody’s Analytics said in a report.

By Park Hyong-ki (hkp@heraldcorp.com)